School funding needs 'circuit breaker'

The federal education minister has seized on a "circuit breaker" proposal to overhaul school funding as proof for his argument the existing system exacerbates inequality.

The Grattan Institute says now is the time to resolve a decades-long debate over school funding, with the system "up for grabs" as ministers negotiate a new deal to start in 2018.

In a report released on Monday, the independent think tank calls for money to be reallocated based on teacher wages growth rather than the higher legislated rates of indexation, with different tiers depending on how school is under- or over-funded.

Savings should be spent on creating master teacher and instructional leader positions to improve teaching across the board.

Education Minister Simon Birmingham welcomed the focus on teacher quality, saying the government had talked consistently about the need to look at where and how money is spent, not just how much.

"It does highlight that the Labor scare campaign and hysteria coming from some states is misplaced," he told Sky News.

"Getting to a point where we apply the same type of model is I think an admirable objective and one I hope the states again can support us on."

Schools already near the standard should have their funding indexed in line with wages costs while over-funded ones would get a lower rate, with about three per cent of schools losing funding.

It also recommends establishing a single independent body to oversee school funding - a key recommendation of the Gonski panel that was never implemented because of its political difficulty.

Labor frontbencher Andrew Leigh described the report as a "thoughtful contribution", saying experts right across the political spectrum agreed on the importance of teacher quality.

"The report puts that front and centre and has some interesting ideas about how to ensure we get superstar teachers into the most disadvantaged schools and keep them there," he told Sky News.

The nation's education ministers meet on December 16 for the next round of talks on a new funding agreement.

Labor education spokeswoman Tanya Plibersek said it was extraordinary the Grattan Institute and others in the debate were talking about the best way to get schools to the resource standard while the the government was "clinging desperately to the changes made in the 2014 budget".

"Unless Simon Birmingham has an explanation for the state ministers about how this government is going to find the $30 billion that's been cut from our schools, we're back at square one," she told reporters.